Q3 2019 Earnings Call
Since we'll be in listen only mode. After the speaker's remarks, there'll be a question answer session to ask the question. Please press star one I'd now like turn the call over Juliet Cunningham, Vice President Investor Relations for enough room.
Thank you and good afternoon, joining me today, or Keith Graceland, Chairman and CEO , Andrew Galligan, Chief Financial Officer.
Keith will review the company's progress during the third quarter and Andrew will provide detailed financial results and guidance later in the call.
Earlier today never released its financial results for the third quarter, which ended September Thirtyth 2019.
A copy of our earnings release is available on the company's Investor Relations website.
This call is being broadcast live over the Internet all interested parties and an archive copy of this webcast will be available on our IR website.
Before we begin I'd like to remind you that management will make forward looking statements on this call within the meaning of federal Securities laws.
All forward looking statements, including discussion of operating trends in expectation of future financial performance.
As well as full year 2019 guidance are based upon current estimates and various assumptions.
These statements involve risk and uncertainty that could cause actual results or events to differ materially.
Accordingly, you should not place undue reliance on these statements. In addition, we will refer to adjusted EBITDA, which is a non-GAAP measure.
Please refer to the GAAP to non-GAAP reconciliation table included with our earnings release.
Please also review our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q , which we expect to file today.
For a full description of risk and uncertainties.
Never disclaims any intention or obligation, except as required by law to update or revise any financial projection.
We are forward looking statements because of new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as of today November six 2019.
And with that I'll turn the call over two key.
Thanks, Juliet and a good afternoon, everyone. Today, we reported third quarter 2019 revenue of 100.2 million worldwide.
One thing you or your growth of 5% and sequential growth of 7%.
We're really encouraged by the fact that patient trials in permanent implants in the U.S. each grew by 18% compared to the prior year period.
As we said looking at the underlying procedural growth is particularly important this year as year over year revenue comparisons are complicated by our decision to end certain high volume ordering pattern patterns in 2019, if we net out to the prior year stocking and current year de stocking impact of this particular decision real U.S.
Sales growth would've otherwise been approximately 17% [noise].
Our strong quarterly results are largely attributable to the operating initiatives. We began at the end of Q1 and while typically these types of initiatives take several quarters to bear fruit I've been really impressed by the positive response from our team as well as our customers.
During our last two quarterly calls ive spoken detail about our actions to optimize the productivity of our sales force in terms of overall tone in the market organizational structure training increased visibility and accountability enhance supported the sales process pricing consistency and responsiveness.
And overall alignment and focus on key priorities not the least of which has been driving trial procedures and conversion to permanent implants.
We've raised the visibility of these important metrics throughout the Salesforce, we continue to measure our progress daily.
In addition, as we move into 2020 were actively prioritizing those market development programs that we believe can move the needle for our customers and sales force a we've become much more focused I think in our efforts.
We've recently consolidated the entire commercial team, which includes global sales marketing therapy optimization and market access under the leadership of need Pelagreeny, our new Chief commercial officer.
Even cheaper, making great strides unify all our customer facing initiatives into a single well coordinated effort.
Have you greater cross functional alignment across the company is critically important as we plan and execute on our current and on our future business [laughter] yesterday, we announced the commercial launch of Senza omnium in the U.S. This launch was a combination of months of planning and preparation across the organization as you might recall, we began the launch preparation probably.
So those months ago by conducting a very large qualitative and quantitative study of our market to inform a greater understanding a relevant market segmentation growth opportunities for the market and specific growth and shared drivers for number.
Well I'm not going to provide a lot of details here on this today I will say this study yielded some valuable information that has helped inform our omni launch strategy.
Certainly the study results validated our hypothesis that customers really want the ability to customize SCS therapies using not only age of 10, but other available frequencies away forms to meet their patients needs overtime.
We believe the versatility that omni provides will both help grow the SCS market and enable never to capture additional share [noise].
During the third quarter, we began the omni launch preparation by conducting extensive field training sessions, followed by very limited market evaluation of the product by all accounts, we received enthusiastic support and positive feedback from the sites involved in that evaluation.
The versatility offered by the omni system has resonated with this group and initial adoption rates for the Ami system. In these accounts has been encouraging.
In addition, we were impressed by the number of physicians, who participated in the limited market release. It showed significant interest impairing frequencies with age of 10, a capability that I'll touch on just a moment.
As I've mentioned previously I view, the omni launches a larger opportunity to reengage with our current customer base as well as address a broader segment of our market. The omni system was developed based on feedback from the clinical community and resulted in a unique product with significant market interest that we are solely able to provide.
In designing the Ami system. Our goal was to develop a product that gives physicians the peace of mind that when the implants the product.
They'll have the versatility needed to achieve the best possible outcomes for their patients.
The omni system is unique because it's the only SCR system that offers HF 10. In addition to all other available FCS frequencies. In addition, omni is capable of pairing frequencies away forms together, including with each of 10, which has created a quite a lot of customer interest in early feedback since it enables dual mechanisms of action with a Jeff 10, and the other rescue has frequencies that no other.
System can offer due to our exclusive ability to provide HF time.
Yeah I'm. Your system is comprised of three new components. The first as a new program or that will make it easy for physicians to offer a wider array of waveforms across the full FCS frequency spectrum are there separately are paired together as I've said.
The second component of the system includes the redesign patient remote.
It is a smaller more intuitive for patients to use and enhances their experience.
The new remote supports greater programming capacity, allowing for the flexibility to expand on the age of 10 algorithm by giving positions the ability to provide additional waveforms either independently or or paired.
Our unique Nevro cloud capabilities will also play an important role in allowing us to track outcomes by patient.
And by physician practice as the omni system provides this greater flexibility and optionality to our customers.
The system comes with an updated and Upgradable IP G, which is a third component and I'm like non rechargeable systems. The omni system is designed to last over 10 years no matter what stimulation profile is used.
Finally, the omni system as conditional full body MRI approval. In addition to the U.S. approval for omni up international approvals are expected in Europe . During the first half of 2020 with Australia coming sometime in the latter half of the same year [noise].
Based on our market research our conviction in the long term potential of our current market of treating lower back and limping has increased we view this as a business it will be a growth driver for us in the FCS space with plenty of runway ahead of it for the foreseeable future, we're focused on improving our execution and increasing our market share and this segment remains.
Our greatest near term opportunity and our highest priority.
Having said that we're also continuing to plan for future growth drivers through our investment in our clinical pipeline.
And on that front, our PDN or are painful diabetic neuropathy study is fully enrolled now and we look forward to presenting preliminary three months data Nims in January .
Unfortunately will just narrowly missed the ability to present the full cohort of patients because a couple of patients were delayed and getting implanted after being enrolled our principal investigator Dr. Erika Peterson will still be presenting patient demographics as well as a three month pain scores adverse events and other relevant findings for nearly all of the patients in this large cohort.
We expect expect to present, the full three months data with P values within a few months following nands.
Based on past experience.
Our expectation is that payers will likely want to see 12 month published data before approving reimbursement.
So this will all imply a full commercial launch with specific claims and meaningful revenue impact in 2022 now. We also believe we could see some increase in utilization before that remember that there are some PDN patients already treated for Lin pain sense, some patients to reimburse today for this primary diagnosis and depending on the data.
Released we'd expect that to continue and possibly even grow as awareness of the data increases.
Regarding our upper limit neck label indication based on the strength of our data we appealed the FDA as assertion that a new RCT are randomized controlled trial be conducted however that appeals not been successful thus far I remember that upper limb pain, including shoulder pain is included in our current labeling and patients are being successfully treated with HFT.
Then in these areas now.
While we like to expand our label to explicitly include neck in order to allow pairs to more uniformly reimburse SCS therapy for these patients we're not yet convinced that the market size justifies the cost of an RCT if thats required a.
We're continuing to review our options for this indication and we'll keep you apprised.
On the legal front.
In our appeal of the summary judgment ruling in the Boston Scientific litigation, we've been notified that the federal circuit, which is the court that will rule on the appeal will hear the case on December 2nd.
Based on that hearing date, we would expect a decision sometime in the first half of 2020, but the exact timing of that decision is of course after the court.
As a reminder, this appeal relates to the summary judgment ruling issued by the Northern District of California in July of 18 in our offensive legal action against Boston Scientific and then that ruling the court invalidated certain claims in our system patents, but otherwise left intact. The claims in our method patents covering high frequency Fcs.
Thus ensuring that we can maintain exclusivity in the use of high frequency therapy for SCS. We realize these cases are complicated understandably there have been occasional misperception dinners, even recently among.
The investor and analyst community on the actual facts, we would just remind everyone that as a result of the July 18 ruling we've been able to maintain exclusivity and high frequency FCS and we're confident in our ability to continue defend our IP. Both in this instance, and in general.
This confidence is further supported by our success in our action against another competitor Stim wave in which we successfully obtained a preliminary injunction regarding the use of high frequency SCS using patents unaffected by the July 18 summary judgment ruling.
Tim Wave is currently appealing the preliminary injunction ruling we expect the federal circuit to hear that appeal in the second half of 2020.
Now before I conclude I'd like to take a moment to thank our Nevro team members, who worked so hard to design develop at launch the Omnia system. The entire never team has done a really great job and we're looking forward to sharing our progress in the market on future calls with you.
I also want to congratulate Andrew on US few to future retirement, which we announced today as well and there's been a champion of never over more than nine years and he's also been a great support to me personally since I joined the company almost eight months ago.
Andrew's agreed to stay on board as we initiate a search for his successor and I'm confident we'll have a smooth transition sometime in 2020.
Andrew is also agreed to be available and transitional role to help us deliver and a couple of our key initiatives and ensure the processes seamless.
I really appreciate in value Anders leadership in the past and throughout this transition.
Finally, I think it's fair to say today that the organization as we gain some real momentum a bit sooner and a bit more than I. Originally expected when I arrived last March.
I believe I told you after Q1 that my goal was to make sure that our commercial organization was at least in a position to effectively launch an important new product meeting omnia by Q4 to be prepared to drive growth in 2020.
Clearly, we've been able to gain much more traction in the market, even well in advance of the omni launch as a result, I can tell you. There's a lot of excitement growing here in our potential for 2020 and beyond.
So with that I'll turn the call over to Andrew.
Thank you for the kind words Keith.
It's been an honor to be part of Nevro for nearly a decade I'm proud of all that we've accomplished together.
The Nevro team truly change patients lives beginning with the original launch of Senza and now with Omnia, which we believe delivers real innovation to the SCS market yet again.
Now turning to our third quarter results helped begin with worldwide revenues for the three months ended September Thirtyth 2019.
Third quarter worldwide revenue was 100.2 million compared to 95.6 million in the prior year period.
This was a 5% increase year over year, and a 7% sequential improvement.
You asked revenue in the third quarter was 84.2 million.
6% increased from 79.6 million during the prior year period.
Year over year increase in U.S. revenue was primarily driven by FCS procedure growth, which was partially offset only by the impact of earlier high volume product orders.
That's an update on that topic, we believe that customer de stocking was completed during the third quarter as we anticipated.
International revenue was 16 million roughly flat compared to the same period last year. So on a constant currency basis international revenue grew by 5%.
Similar to what we saw in Q2 European growth in the low double digit fund a constant currency basis was partially offset by weakness in Australia.
Gross profit for the third quarter of 2019 was 69.9 million, a 4% increase compared to 67.2 million in the prior year period.
As a percentage of revenue gross margin was 69.8% in third quarter 2019, compared to 70.3% in the year ago period.
Total operating expenses for the third quarter of 2019 were 85.9 million, an increase of 12% year over year compared to 76.5 million in the prior year period.
The year over year, increasing operation expenses was primarily driven by U.S. sales and marketing personnel costs.
Legal expenses associated with patients litigation were 1.9 million for the third quarter 2019, compared to 3.5 million in the prior year period.
Net loss from operations for the third quarter 2019 was 16 million compared to a loss of 9.2 million in the prior year period.
Adjusted EBITDA for the third quarter 2019 was a loss of 2 million.
Pair to a positive 5.2 million in the prior year period.
Adjusted EBITDA excludes interest taxes, depreciation and amortization as well as litigation and noncash stock based compensation charges.
For GAAP to non-GAAP adjustments fleets are fair to the reconciliation table in our earnings press release.
Cash cash equivalents and short term investments totaled $232.8 million as of September Thirtyth 2019.
Net cash used during the third quarter 2019 was just 1.2 million.
31.8 million for the nine months ended September Thirtyth 2019.
Turning now to our full year 2019 guidance, considering our third quarter results. We currently expect worldwide 2019 revenue to be into 383 to 386 million range and gross margin to be in the high sixtys as a percent of revenue.
That concludes our prepared remarks.
Operator, please open the lines for questions.
Thank you as a reminder, fueling a question. Please press star one your first question goes from David Lewis with Morgan Stanley . Your line is open.
Hi, good morning, and congratulations on a nice quarter ketones focused on a couple of things here, maybe one on a business outlook in the second Omnia first just use the goal here is to get back to implant growth of 15, 18%. The last couple of quarters, if I kind of adjust the 5% U.S. growth rate for stocking you get pretty close to mid teens.
I'm, assuming the remainder as price, but I think Keith about the fourth quarter guide it doesn't really imply that you get back to sort of that mid teens level as you sort of anniversary. The stocking. So just your sense of when this business in the U.S. can get back to mid teens growth and any dynamics of the fourth quarter you'd like to he'd like to call out here 'cause it looks a little conservative for our taste in one quick follow up and.
Yeah.
Okay.
Well listen I.
I think where if you look at our procedure volume now we're already as we've said in the mid to upper teens from a growth rate standpoint.
I think made clear the the spread between reported revenues and unit volume and why that is the case with regard to Q4 guidance, which I think as the crux of your question.
Look we are we're a couple of quarters, two and a half quarters into a.
Fairly.
Complex a turnaround we're making a lot of change the organization, we just introduced a new product.
I will tell you there's some conservatism built into our guidance for I think good reason, but conservatism nonetheless.
I don't think Theres anything about where we're headed into Q in Q4, that's markedly different from where we are today from a trending standpoint, but but this is still a a fairly young turnaround and I think we love to get another quarter or so under our belt before we before we catch up fully that makes sense.
Okay, that's very helpful, Keith and I think about Omniab.
Fundamentally different system. The difference is obviously programming complexity.
Big of a change is that going to be four for sales and clinicians. So we think about full commercial launch how long do you think you to you in full commercial launch how long does it take to train the reps.
And what doesn't that early physician feedback as it relates to getting used to the programmer. Thanks, so much yeah.
Yeah. The program or is I think one of the most attractive parts of the system and and one that has garnered probably most positive.
Reaction, it's very intuitive, it's very simple a very clearly lays out what the programming options are between frequencies either separately repaired and I think it's safe to say the sales organization and the clinical community. So far have been extremely excited about the layout in the capabilities of the programmer from a training standpoint, I'd say, we're we're probably about half.
We've done it will be completely done by the end of this week at least with the first the first tranche of the training now that'll be an ongoing thing.
Thing for us, but I think that our salesforce is trained and competent to deploy.
The Omnia and all of the programming associated with Omnia. They are I think extremely excited about this capability and I think that excitement is coming mostly from the excitement to hearing from their customers.
Okay. Thanks, so much yes.
Your next question comes from Danielle until fleet with SVP leave Rick Your line is open.
Hi, good afternoon, guys. Thanks, so much for for taking the question.
Keith I was wondering if you could give a little bit more color on what is factored into the guidance from a trial growth rate and if this is a good leading indicator to how not asking and again 2020 guidance the to how we should be thinking about the potential for 2020 growth in this mid to high teens rate.
Yeah.
Well.
Obviously, we are coming into fourth quarter, we've just changed our guidance and we've been pretty granular and some of the some of the input. We've given you on on procedural rate. So I understand the question that bags.
We just aren't in a position to give anything even kind of tiptoeing into into 2020 guidance at this point.
I will say I don't look I think the I think the growth that we've been able to create in procedure volumes and trial and and frankly, it seems pretty apparent now that we've actually captured share for a couple of quarters in a row I don't think theres anything about that that is.
Unique to the timeframe or temporal I think it's one that we would expect to continue in fact, I would say that we're probably still in the early to mid innings of.
Of kind of rehabilitating our commercial.
Structure and effectiveness. So I think look we're really bullish about going forward, but.
It's early and we still have some things to learn here in Q4 and in the initial omni launch.
But we don't have any expectations that would necessarily.
Change in any dramatic fashion going forward, we're encouraged.
Okay that that's.
That's totally fair just one quick follow up.
If I could.
Look at the competitive environment, what you're seeing from a market growth perspective, I mean, it sounds like obviously you guys are growing faster than the market do you feel like that market has reached a point of stability and is is on its way back to work.
Sustainable growth going forward and benefiting from what seems to be wrong tailwinds from opioid crisis et cetera. Thanks, so much.
Yeah.
Well stabilization I think yes, it feels that way I'm not everybody has reported of course, we have one more participant.
A competitor that will report in a week or two so we'll have a better view then but certainly it seems like it has stabilized.
All of our instinct and knowledge about the business and frankly, all the research we've been doing.
Continues to point to a lot of future growth in the business a lot of a unpenetrated an untapped market potential in the core.
In the core patient population not in even considering future indication so.
Look I think as we get into another round of new product introductions I suspect, we'll see some new product activity coming from our competitors throughout 2020 as well.
Everything we see it continues to be favorable in terms of long term growth trends now we're going to have to get through that and see it just like everybody else, but it does seem to have stabilized and.
And there are some things that are pretty encouraging I think as we move into 2020 and beyond.
Thank you.
Your next question give some Larry Biegelsen with Wells Fargo. Your line is open.
Good afternoon, Thanks for taking the question and congrats Keith on another good quarter.
Thanks, everyone at Omnia, what an omni one on kind of pipeline. If you will up so first on the omni you talked about Keith I'm expecting this do impact your growth.
When do you think we could start to see an impact it could we see it as early as Q4, but I don't think you've talked about the pricing strategy is going to be priced at a premium.
And then I had a follow up.
Yeah.
But what we Didnt model anything and we Didnt contemplate any any meaningful impact in our in our guidance from Omnia in Q4 keep in mind that.
You know the patient treatment algorithm.
Larry as well as anyone we as we introduce the product patients have to be scheduled for trials. Those trials have to be successful. They didn't have to be approved and scheduled for permanent implants that process takes a little bit of time.
There is in there and there will be some activity I think that was held waiting for the for the Omniab. So I think we will see probably some activity related to omnia. It's hard to it's hard to really quantify that I think until we get into Q1 and 2020. So we didnt included in our modeling.
From a pricing standpoint, typically that's that's the way, we and others in the market have have maintained and manage pricing is by product lifecycle management.
There will be a little bit of that from us, obviously, I'm not going to get into specifics on on pricing.
I will tell you in the past we've had some experience with really going after price as a primary endpoint you've heard me talk about that before that is not the case here.
So certainly we think it's a product that justifies a premium I think in many cases, that's exactly what will happen.
Our priority here as growth and our and our priority is growth in the market and growth by market share and and second priority would be pricing, but definitely in that order. So that's I hope that that helps a little bit.
That helps a lot. Thanks, and then for my follow up Keith I wanted to get your updated thoughts thoughts on the external devices. You know there were couple in the market.
One from a competitive standpoint, what are you seeing a decade, you know I think you've talked about these being complimentary to the fully implantable devices. So what's your latest thinking on you know.
Wanting to have something like this technology internal.
I had never out thanks for taking the questions.
Well I look I don't think I don't think our thinking has changed dramatically I think the.
The external pulse generator concept external better one is an interesting wanted I think it hasn't place I think there is a probably a portion of patients that might not otherwise get to therapy.
Maybe because of intimidation wasn't implantable form factor.
In the IP G., so I do think that it has a place.
I think it's not a mainstream replacement for a for traditional IP GE kind of product construct but I think it could be a market expand or so I don't know that our view as the change that much we're interested in watching it and seeing what's happening.
In terms of whether or not it has a role in the nevro product catalog either I assume you mean either through.
You know some sort of business development or internal product development. That's something we are looking at it will continue to look out along with a number of concepts.
We're watching a we're watching very very carefully.
We may at some point in the future choose or participate and if we get to that point, we'll certainly let people know.
Thanks for taking the questions.
Your next question comes from Robbie Marcus with JP Morgan Your line is open.
Probably might take JP Morgan rather than a nice quarter.
Yes, Thanks, Rob I congrats on a good quarter, sorry, just jumping between calls Tonight.
I was hoping you can talk about.
What you've seen at the doctor level too.
Substantially improved the the traction you've had this year I understand.
Clearly, there's new management, we're having new sales put in place, but what do you think has been the half the underlying driver for the improvement in growth is it just you know.
Seeing the ground in in a more a concerted effort.
There are different message out there what do you think is really drives take care.
Yeah.
Well.
I guess I'll start the answer that question. The same idea I think in the call last quarter, which is what's more remarkable is not it's not to growth. We're seeing now I think what's more remarkable that we stop seeing it at some point.
Depending on where you have our market share and I think most estimates are somewhere between 15, and 19% share kind of in the mid to upper teens.
If you look at our product if you look at our data. If you. If you look at the market adoption in the first two and a half you know dash, maybe three years and then the rather sudden cessation of that growth that is really the question is why did we stop growing and I've been very clear, but I thought the reasons were mostly in kind of the self inflicted execution.
Bucket.
And that in their fixing that we could reengineer sales growth that frankly should never have stopped and market share capture that in my mind, probably should not have stopped anywhere near.
This early so I think I think thats, what were seeing not some unique new phenomenon with customers.
But a continuation of what what probably should have continued in the first place over the last year and a half.
Or so so I think what a lot of what you're seeing is a lot of really good and improved blocking and tackling and I've listed the categories of some of those things in my remarks, so I won't recover them.
But I think we have a lot less to do in that category as well I think that's to me anyway, that's encouraging.
I think the early response of the changes we've made have been I've been gratifying, but I think we have a lot less to do and I'm encouraged by the likely impact of the things that will continue doing.
And additive to that of course will be things like omnia, which aren't even in the execution bucket. So that's.
Let's maybe kind of a high level answer your question, but I hope, but it gets there.
Your next question goes from Bob Hopkins, and then just a follow up on that I was wondering if you could.
Maybe just as you look across the competitive landscape clearly omnia is going to.
A big impact over the course in 2020, but is there anything competitively that gives you pause or you think.
That we should be aware of.
Well Theres always lots of little things that gives me pause I always.
Look I give all of my competitors, a huge benefit of the Dallas and.
And there are good companies with good products and good people. So I I assume they will respond in some ways as we predicted maybe even a few that we havent.
And and they'll make a good run of it as they always do so but there is no one single thing.
I think out there that gives me pause in terms of what we expect from competitors in 2020, I think it would be more of the I think it would probably be more of the same.
Your next question gets or Bob Hopkins will be away. Your line is open.
Great. Thank you congrats on a great quarter Keith.
Just wanted to ask a couple of quick follow ups.
Just on omni I just to be clear last quarter, you said that.
You might expect a decent sized impact within the first couple of quarters.
I don't think I'm hearing anything differently from you, but I just just to be clear is that still the case no change in the way you're framing the timelines for when you could see this start to contribute relative to what you said last quarter.
You're talking about Omnia, specifically, Bob right, Yeah, exactly yes, yes, no no no no change in our thinking.
Okay.
And then just wondering if you could give us latest updated thoughts.
On the on the diabetic neuropathy opportunity.
If I noticed on that you've been kind of looking into so what what are your sort of latest thoughts on.
Sizing the incremental opportunity for Nevro.
And how should we think about the potential impact.
You know next year.
Yeah.
Well, we'll if it's relevant we'll talk about that in the framework of our guidance for 2000 quality, but as I indicated my remarks today I think the impact next year maybe.
Relatively small compared to other things we're doing it also maybe hard to discern.
Until until we're after the fact, and we and we try to figure out where these patients actually came from I would expect some impact next year, but I'm not ready to to try to quantify it at this point.
In terms of.
Yeah, I guess in terms of the market size I don't think we have anything new for you on a quarter over quarter basis from from last quarter will be a little bit more granular in 2020 with our thinking on on PDN with regard to market size segmentation launch, but a lot of that will be informed by the data that comes out of the trial, which is still.
Which is still being put together.
What we do know and what we've said before as you'll probably recall is that there are we thinking the U.S. alone about 4 million patients who are being medically managed.
For severe pain due to diabetic neuropathy.
And roughly half of those are failing in that treatment.
And ultra is pretty clear on that point that they're about 50% of patients who are managing the traditional fashion, who have well continue to have intractable in severe pain.
Implying a potential market of about 2 million I've no doubt that we'll see some inset further segmentation that come out of the data from our trial, but.
Right now that looks to be sort of the pond and which this therapy would be fishing.
To get outcomes in patients who need it.
Okay. Thank you and just if I could sneak in maybe one more was there anything particular in Q3 that drove the uptick relative to the trends that we're seeing in Q2 or was it really just more a continuation of the process that you put in place when you started.
Yes, no I don't think it's I mean look at our growth rates and kind of where we exited Q1 and early Q2, what we talked about for the totality of of Q2 and where we are now for Q3. It seems to me to be a continuation of the trend and there wasn't anything.
Episodic a remarkable in Q3 that was different from Q2 other than just continuation of a of some of the refinement that we've been putting in place in the in the business.
Terrific. Thanks, so much okay. Thanks, Bob.
Next question comes from Jason Mills with Canaccord Genuity. Your line is open.
Hi, Keith Thanks for taking the question congrats on another good quarter.
Good thanks.
Quarter several quarters before you started the company stopped giving numbers and sales reps that clearly you highlighted the.
Proficiency proficiency with which you been.
Instituting blocking and tackling measures to improve could you talk about the composition of the sales force should things that.
You've done have you changed the size of you made it smaller more more efficient have you made it larger.
And more more broad.
Comprehensive coverage standpoint, what do you want to talk about with respect to your sales force.
And in some of the specifics that.
Specific measures you've taken.
To assets.
Success early.
Yeah, well I think if you look at a size the total footprint of our field operation in the us.
And if you look at the end of Q1 so.
I started at the end of March and there were a fair number of headcount additions in the sales group put in place in the second half of 18 and in the first quarter of 19 PSMC since March since the end of first quarter, we haven't grown the the U.S. field operation I think the in fact I think.
The total footprint maybe.
Just slightly smaller.
The makeup of the of the field operation is slightly different.
In terms of maybe a few more technical consultants, who are largely responsible for managing patient.
Programming and care after the implant and maybe maybe a slightly smaller footprint of sales territories.
That's a trend through things like natural attrition that at the very lease that will probably continue I don't think at this point, we anticipate any meaningful change by the way in the in the U.S. field footprint.
Through 2020, as we sit here today.
That's helpful. Thanks, and then.
As it relates to your account base and Omnicam coming on board, which should help you penetrate deeper but also open new accounts could you talk about.
Youre.
Trial and permanent implant growth these last two quarters.
And.
Within that construct what you've seen in terms of say same store sales versus new store or new account growth to drive those numbers and what you would expect to derive in terms and specifically new store sales growth. These are the omni and.
Your sales force, becoming more effective going out in home team in 2020 would you expect to see.
Serial increase in the number of accounts that are buying.
Grow SCS.
No it's actually a really good question Jason.
Hi, I would love to give you a lot of detail around that.
It's hard to do I think from a from a competitive standpoint, I will tell you that if retrospectively so looking back over this year so far.
I think that is pretty clear that much of the growth not all of it but but probably a disproportionate amount of growth. We're now seeing is coming from same store sales certainly not all of it and I don't want to break it down, but I think we're doing a much better job of developing.
Of developing our business developing a helping our doctors grow their therapeutic practice and developing our market share within those practices.
Probably more so than new customers.
We have a very specific strategy in mind at a mix in mind as we launch Omnia and we have very specific market segmentation and targeting and marching orders that we've given our sales organization and but I'm going to stop short of describing that in detail for obvious reasons, but we do see the opportunities framed very much as you for.
Name them as being specific to doctors, who are there our current customers or future customers, which ones.
And down to the specific account names.
In terms of the Roadmaps, we've given to our sales organization, so but up but I'm not going to as you might understand I'm not going to go into details what those are.
I can understand that maybe I'll, just ask one follow up and get back into queue with that level of detail with respect to down to the account name using your words do you feel that level of detail was.
Remained integra before you joined to the extent that you could capitalize on it.
Where is that relatively new.
Thank you.
Well I look I think the rigor around that practice and many others around that the support and and management in direction and training of our sales organization is.
As all relatively new some of it was being done directionally and and in bits and pieces and maybe a little bit in consistently the vast majority of what we're really doing an empty and emphasizing right now was probably not.
Being done maybe in some cases at all but certainly in other cases, maybe not effectively uniformly consistently.
Or in any kind of a focus or prioritize way so.
I think it's safe to say that that initiative and many others in terms of their impact are probably relatively new.
Thank you congrats again.
Thanks.
Your next question goes from attitude right. Yes. Your line is open.
Hi, Thanks for taking the question. So I just wanted to be clear I know you said before that you felt most of the improvement is really due to fixing a lot of the self inflicted wounds, but do you think there has been positive change in the market as well are there things out there that you can point to that would suggest that.
Well I think the I mean, I can tell you that anecdotally from interaction with customers and and more than anecdotally through our market research and that's been kind of a honestly.
An ongoing effort for the last eight months.
There is a there's an awful lot of enthusiasm about where the market could go should go and where our customers desire. It to go. So I don't think there's any shortage shortage of belief in the market belief and its potential or interest in growing at.
As for the actual.
Results I think you have the same data honestly, we do and it's it's still not complete for Q3.
And so I know the effort has been how do we reconcile. These these two things are you been grappling with it as as we have been we see a little bit of up I think it's safe to say, we see a little bit of a stabilization in the beginning of reversal in this quarter that we'll see if that's see if that's true in Q4 and into into.
2020, but I think it it looks and feels that way to our team we've got one more competitor to to announce.
I think maybe that competitor may have a year over year.
Comparable challenge that they'll have to deal with I suspect we won't start to see a lot of gross revenue growth market impact until Q4, probably into into 2020, but it feels good to our team right now.
Okay and then just on the on the launch I was hoping you just help frame the shape of the ramp there you talked about the limited launch and officially announcing it.
Now as it full systems go or going to see more of a ramp up period into next year, and maybe compare to prior launches or something like that to give us a sense for how it can go.
Yes, I think it's no I think its full systems go I think we've got a little bit of our.
Launch training and planning to complete through the end of this week.
But I think it's you know if you look at our direction to our sales organization our preparation for launch how we're launching our inventory everything else. It's.
You know it's gone from from zero to 100 here, So where we are in full launch mode between now and the next couple of weeks and certainly thereafter.
Great. Thank you.
Your next question comes from Dave Turkaly with JMP Securities. Your line is open.
Thanks and congrats.
For the folks that have the earlier versions of the product can they upgrade and are you assuming that some of them will and secondly for Omnia. If you were to swap a competitor Cana Ken Omnia.
Work with the leads as they currently are.
So there's no difference in terms of how the leads interface with our own IP GE or how they are or how the new leads or how the omni leaves because they're the same leads.
Might have.
Might have worked with a competitive design so not none of that has has changed in terms of.
Backward.
Compatibility I think what we've said is that the omnia product is upgradable.
And and that implies that any future innovation, we bring to market that is specific in the areas of.
Frequency or waveform innovation other software firmware features that we would that we would make sure that the omnia is upgradable.
And I guess it just quick follow up are you assuming that any of that happens do you think whether it be customers that you think will come in and maybe docs or their patients say hey, you know.
I'd like that.
The frequency pairing or the new features that this device has thanks.
Yes, I mean, we can certainly if you're if you're asking whether or not they can use new programming features to.
Backward programming say a sends a two patients.
Then the answer to that is yes that is that as a capability. They will have now so.
For example, a patient wouldn't have to contemplate being X planted and then re implanted with an omnia if they felt like the doctor felt like they needed that functionality and that's something that we felt felt was important to our customers.
And a feature that we wanted to make sure was available.
Thank you.
Your last question comes from Margaret with William Blair. Your line is open.
Hi, guys.
And on to migrate thanks for taking my question.
I just wanted to ask one question on the bottom line.
Can you you have joined the organization, how do you view incremental opportunities for leverage going forward.
So the launching omni and necessary, but could we see incremental leverage on the sales and marketing.
Line, particularly given you won't be a hiring new reps next year.
Yeah.
So I think that will be probably more clear will make it more clear in our 2020 guidance. You know my my objective really was to sort of stabilize where we where we were coming in from a spending standpoint really understand it understand the growth sensitivity to some of the investments we were already making and learn the organization and frankly because.
To feel for what growth I thought was really possible in this market and for this company before we began to even look at.
<unk> expenses.
I think the two things that have really contributed heavily to our operating expenses have been our field sales organization and our clinical trial activity, especially those areas that have really grown.
And I think there's every expectation stop short of guiding for 2020, but I think we have every expectation that 2020 will be a year.
In which we demonstrate a lot of leverage I think certainly safe to say more than than you've seen from us in the past so.
But more to more to come on that.
Okay got it that's helpful. And then it seems like international stabilized debate in the quarter and on a constant currency basis.
That is the stabilization and try and how do you view growth in this segment going forward and is Australia getting better.
So I think will growth going forward will contemplate I can think during our guidance I think that there is I think there is room for growth I think actually the European market for as long as we've been.
In that market and as matures that market is I think we continue to do reasonably well there I think our expectations would always be for improvement the Australian market. Obviously has been a troubled one for us over this last year.
I think we've still got work to do there, but I think we believe that's work that's doable so as we come into 2020.
I think certainly would be our expectation that are such our position in Australia, and our growth there would stabilize and we'd get back to a growth mode.
But I think we'll we'll probably be a little bit more direct on that point when we give guidance for next year.
Okay, great appreciate it.
That's all because we have for today I turn the call back to Q3 Osman for closing remarks.
Okay, great. Thank everyone for joining us appreciate your time, I know, where we're right in the throws of lots of earnings announcements I. Appreciate your joining us for this call. We'll look forward to updating your after the next quarter.
That's inclusive conference call you may now disconnect.